This is a report on the Advertising effect in telecom industry in india

Introduction

The main area of the study is to study the Advertising in Telecom Industry in India and its

Impact on Customers. The sources of data collection used in the study are both primary and

secondary in nature. We are going to conduct a survey to know the impact of advertisements

of telecom industry on customers which is part of primary data. We will collect the data from

different websites and books mentioned in references which are the part of secondary data.

In this report I have tried to analyze the present scenario of Indian telecom sector. The Real aim

of the project is to study the effectiveness and response towards advertisements provided by

major players, but many sub objectives are also included under this project so as to make it

comprehensive one.

In this project I have covered the Analysis of Telecom Industry of India. In this analysis I

have shown history and present scenario of the Telecom industry in India. I have

complemented this with the internal study of companies. I have shown history, growth,

market share and advertising strategies adopted by Vodafone, Airtel, Reliance

communication, BSNL and Idea cellular.

The project is based on advertising so I have first explained about advertising, its importance,

managing advertising decisions and types of advertising. I have analyzed the growth in ad

volumes of telecom sector, share of telecom sector advertising, segment wise growth in

telecom sector, share of key players in advertising, new brands advertised in telecom

equipments and service and share of sales promotion in telecom sector.

Primary data has been collected in which focus group study had been conducted to design the

customer survey questionnaire with a sample size of 200 respondents. This survey has been

conducted in AHMEDABAD. Secondary data was collected through websites, newspapers,

magazines and books.

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After the data collection, it has been compiled, classified and tabulated manually and with

help of computer. Then the task of drawing inferences has been accomplished with the help

of percentage and graphic method.

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Methodology

The research methodology that I undertook for the purpose of this study is enumerated below:

PRIMARY RESEARCH:

This consisted questionnaire and interaction from various people. A focus group study will be

conducted to design the customer survey questionnaire with a sample size of 200 respondents.

SECONDARY RESEARCH:

Sources of secondary data were primarily the Internet , journals , newspaper, annual report,

database available in the library, catalogues and presentations.

Research Design:

The research design is Descriptive studies. Descriptive studies are well structured, they tend to

be rigid and its approach cannot be changed every now and then.

Descriptive studies are undertaken in many circumstances:

1. When the researcher is interested in knowing the characteristics of certain groups such as age ,

profession.

2. When the researcher is interested in knowing the proportion of people in given population who

have behaved in a particular manner, making projection of certain things.

The objective of this kind of study is to answer the why, who, what ,when and how of the subject

under consideration.

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I have taken descriptive because my research includes the knowing the behavior of customer

towards advertisement. I have analyzed how people of various age group respond to different

advertising or their perception towards advertisement. Also my survey is related to companies

like Vodafone, Airtel, Reliance communications, BSNL and Idea cellular.

Types of questions:

OPEN ENDED:

They give the respondents complete freedom to decide the form , length and detail of the answer.

Open questions are preferred when the researchers is interested in knowing what is upper most in

the mind of respondents.

DICHOTOMOUS:

This type of questions have only two type of answer, yes or no. true or false etc.

MULTIPLE CHOICE QUESTIONS:

In the case of multiple choice question the respondents is offered two or more choices. The

researcher exhausts all the possible choices and the respondent has to indicate which one is

applicable in this case.

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History of Telecommunication Industry

The history of telecommunication industry started with the first public demonstration of Morse’s

electric telegraph, Baltimore to Washington in 1844. In 1876 Alexander Graham Bell filed his

patent application and the first telephone patent was issued to him on 7th of March.

In 1913, telegraph was popular way of communication. AT&T commits to dispose its telegraph

stocks and agreed to provide long distance connection to independence telephone system.

In 1956, the final judgment limited the Bell System to Common Carrier Communications and

Government projects but preserving the long-standing relationships between the manufacturing,

researches and operating arms of the Bell System. In this judgment AT&T retained bell

laboratories and Western Electric Company. This final judgment brought to a close the justice

departments seven –year-old antitrust suit against AT&T and Western Electric which sought

separation of the Bell Systems Manufacturing from its operating and research functions. AT&T

was still controlling the telecommunication industry.

In 1982 , AT&T was requested to divestiture its stock ownership in Western Electric;

termination of exclusive relationship between AT&T and Western Electric; divestiture by

Western Electric of its fifty percent interest in Bell Telephone Laboratories, AT&T ‘s

telecommunication research and development facility, is a jointly owned subsidiary in which

AT&T and Western Electric each own 50% of the stock; separation of telephone manufacturing

from provision of telephone service and the compulsory licensing of patents owned by AT&T on

a non-discriminatory basis.

It was telecommunication act of 1996 that true competition was allowed. The act of 1996 opened

the market to all competitors. AT&T being the first telecommunication company paved the road

for the telecommunication industry as well as set the policy and standards for others to follow.

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Global Scenario

World telecom industry is an uprising industry, proceeding towards a goal of achieving two third

of the world's telecom connections. Over the past few years information and communications

technology has changed in a dramatic manner and as a result of that world telecom industry is

going to be a booming industry. Substantial economic growth and mounting population enable

the rapid growth of this industry.

The world telecommunications market is expected to rise at an 11 percent compound annual

growth rate at the end of year 2010. The leading telecom companies like AT&T, Vodafone,

Verizon, SBC Communications, Bell South, Qwest Communications are trying to take the

advantage of this growth. These companies are working on telecommunication fields like

broadband technologies, EDGE(Enhanced Data rates for Global Evolution) technologies, LAN-

WAN inter networking, optical networking, voice over Internet protocol, wireless data service

etc.

Economical aspect of telecommunication industry: World telecom industry is taking a crucial

part of world economy. The total revenue earned from this industry is 3 percent of the gross

world products and is aiming at attaining more revenues. One statistical report reveals that

approximately 16.9% of the world population has access to the Internet.

Present market scenario of world telecom industry: Over the last couple of years, world

telecommunication industry has been consolidating by allowing private organizations the

opportunities to run their businesses with this industry. The Government monopolies are now

being privatized and consequently competition is developing. Among all, the domestic and small

business markets are the hardest.

Until the 1980s the world telecommunications systems had a simply administrative structure.

The United States telephone service was supplied by a regulated monopoly, American Telephone

and Telegraph (AT&T). Telegraph service was provided mainly by the Western Union

Corporation. In almost all other countries both services were the monopolies of government

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agencies known as PTTs (for Post, Telephone, and Telegraph). In the United States beginning in

1983, AT&T agreed in a court settlement to divest itself of the local operating companies that

provided basic telephonic service. They remained regulated local monopolies, grouped together

into eight regional companies.

AT&T now offers long distance service in competition with half a dozen major and many minor

competitors while retaining ownership of a subsidiary that produces telephonic equipment,

computers and other electronic devices. During the same period Great Britain’s national

telephone company was sold to private investors as was Japan’s NTT telephone monopoly. For

telegraphy and data transmission, Western Union was joined by other major companies, while

many multinational firms formed their own telecommunications services that link offices

scattered throughout the world. New technology also brought continuing changes in the

providers of telecommunication. Private companies such as Comsat in the United States were

organized to provide satellite communication links within the country.

Around the world we are witnessing remarkable changes to the telecoms environment. After

years of debate, structural separation is now taking place in many parts of the world including

Hong Kong, New Zealand, Singapore and some European markets. Structural separation – or at

least full-blown operational separation – is required to advance the entire industry and to create

new business opportunities and innovations which will benefit our society, our economy and

ultimately our industry.

The focus is also shifting away from broadband to what it can actually achieve. Next Generation

Telecommunications better describes this new environment and is essential for the emerging

digital economy. Important services that depend on NGT include telehealth, e-education, e-

business, digital media, e-government and environmental applications such as smart utility

meters.

In order to meet this burgeoning consumer demand for NGT applications, we are seeing

increasing investment in All-IP Next Generation Networks and fiber networks. A proper

inventory of national infrastructure assets is required if we want to establish an efficient and

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economically viable national broadband structure for these services. In the developing markets,

next generations telecoms will take the form of wireless NGNs (i.e., LTE/WiMAX).

These are some of the elements of the broader ICT revolution that is unfolding before our very

eyes. We are right in the midst of the transition from old communications structures (mainly one-

way streets) to new structures that are fully-interactive and video-based.

One of the drivers behind the industry changes are the declining revenues experienced by the

telcos in their traditional markets. Over the past 10 years or so, fixed-line operators have been

affected by deregulation, a severe industry downturn, declining prices and major inroads by

mobile services. In addition, people are drifting to other forms of communication, such as email,

online chat, and mobile text messaging instead of the traditional phone.

This has also led to an increased need for bandwidth, which in turn has revived the submarine

cable sector. In recent times there have been many cable build-out announcements around the

world, and some major systems are again being constructed. Over 25 systems are expected to be

built over the next two to three years and network upgrades are also on the agenda for some

existing systems.

It is clear that the mobile industry is also undergoing profound changes. The saturated developed

markets are forcing the industry to find new revenue streams and we are now seeing other

organizations such as media companies, content providers, Internet media companies and private

equity companies becoming involved in this market.

For the time being however, voice will remain the killer application for mobile with some data

services included as support services and niche market services. 4G (ie, WiMAX/LTE) is the real

solution for mobile data and by 2015 it is expected that the majority of mobile revenues will

come from data.

With the Internet economy, digital media and other telecommunications activities becoming

further established, the need for modern and efficient infrastructure is becoming more critical.

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Key highlights

In 2008 the overall telecoms industry was valued at well over $3.5 trillion with steady

growth ahead.

On a regional level, Western Europe still has the largest share of broadband subscribers

worldwide.

DSL is the most popular broadband access technology worldwide, equating for around a

66% market share.

Worldwide telecom statistics at a glance – mid-2008

Telecom Statistics of the world

Population 6.7 billion

Fixed lines 1.3 billion

Mobile subscribers 3.5 billion

Mobile text messages sent 2.3 trillion

Internet users 1.2 billion

Fixed broadband subscribers 380 million

(Source: BuddeComm estimates)

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Indian Overview

Beginning of telecommunication in India

1851: First operational land lines were laid by the government near Calcutta

1881: Telephone services introduced in India

1883: Merger with postal system

1923: Formation of Indian radio Telegraph Company

1932: Merger of ETC and IRT into Indian Radio and Cable Communication Company

1947: Nationalization of all foreign telecommunication companies to form the posts, telephone

and telegraph, a monopoly run by the government’s ministry of communications

1985: Department of telecommunication established, an exclusive provider of domestic and

long-distance services that would be its own regulator

1986: Conversion of dot into two wholly government – owned companies the VSNL for

international telecommunication and MTNL for services in metropolitan areas

1997: Telecom regulatory authority created

Telecommunication is important not only because of its role in bringing the benefits of

communication to every corner of India but also in serving the new policy objectives of

improving the global competitiveness of the Indian economy and stimulating and attracting

foreign direct investment.

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Today the Indian telecommunications network with over 375 Million subscribers is second

largest network in the world after China. India is also the fastest growing telecom market in the

world with an addition of 9- 10 million monthly subscribers. The teledensity of the Country has

increased from 18% in 2006 to 33% in December 2008, showing a stupendous annual growth of

about 50%, one of the highest in any sector of the Indian Economy. The Department of

Telecommunications has been able to provide state of the art world-class infrastructure at

globally competitive tariffs and reduce the digital divide by extending connectivity to the

unconnected areas. India has emerged as a major base for the telecom industry worldwide. Thus

Indian telecom sector has come a long way in achieving its dream of providing affordable and

effective communication facilities to Indian citizens. As a result common man today has access

to this most needed facility. The reform measures coupled with the proactive policies of the

Department of Telecommunications have resulted in an unprecedented growth of the telecom

sector.

The thrust areas presently are:

1. Building a modern and efficient infrastructure ensuring greater competitive environment

2. With equal opportunities and level playing field for all stakeholders.

3. Strengthening research and development for manufacturing, value added services.

4. Efficient and transparent spectrum management

5. To accelerate broadband penetration

6. Universal service to all uncovered areas including rural areas.

7. Enabling Indian telecom companies to become global players.

Recent things to watch in Indian telecom sector are:

1. 3G and BWA auctions

2. MVNO

3. Mobile Number Portability

4. New Policy for Value Added Services

5. Market dynamics once the recently licensed new telecom operators start rolling out

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6. Services.

7. Increased thrust on telecom equipment manufacturing and exports.

8. Reduction in Mobile Termination Charges as the cost per line has substantially reduced

9. Due to technological advancement and increase in traffic.

India's telecom sector has shown massive upsurge in the recent years in all respects of industrial

growth. From the status of state monopoly with very limited growth, it has grown in to the level

of an industry. Telephone, whether fixed landline or mobile, is an essential necessity for the

people of India. This changing phase was possible with the economic development that followed

the process of structuring the economy in the capitalistic pattern. Removal of restrictions on

foreign capital investment and industrial de-licensing resulted in fast growth of this sector. At

present the country's telecom industry has achieved a growth rate of 14 per cent. Till 2000,

though cellular phone companies were present, fixed landlines were popular in most parts of the

country, with government of India setting up the Telecom Regulatory Authority of India, and

measures to allow new players country, the featured products in the segment came in to

prominence. Today the industry offers services such as fixed landlines, WLL, GSM mobiles,

CDMA and IP services to customers. Increasing competition among players allowed the prices

drastically down by making the mobile facility accessible to the urban middle class population,

and to a great extend in the rural areas. Even for small shopkeepers and factory workers a phone

connection is not an unreachable luxury. Major players in the sector are BSNL, MTNL, Bharti

Teleservices, Hutchison Essar, BPL, Tata, Idea, etc. With the growth of telecom services,

telecom equipment and accessories manufacturing has also grown in a big way.

Indian Telecom sector, like any other industrial sector in the country, has gone through many

phases of growth and diversification. Starting from telegraphic and telephonic systems in the

19th century, the field of telephonic communication has now expanded to make use of advanced

technologies like GSM, CDMA, and WLL to the great 3G Technology in mobile phones. Day by

day, both the Public Players and the Private Players are putting in their resources and efforts to

improve the telecommunication technology so as to give the maximum to their customers.

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Telecom Subscriber Base In India

Indian telecommunication Industry is one of the fastest growing telecom market in the world.

The mobile sector has grown from around 10 million subscribers in 2002 to reach 150

million by early 2007 registering an average growth of over 90%. The two major reasons that

have fuelled this growth are low tariffs coupled with falling handset prices.

Surprisingly, CDMA market has increased it market share up to 30% thanks to Reliance

Communication. However, across the globe, CDMA has been losing out numbers to popular

GSM technology, contrary to the scenario in India.

The other reason that has tremendously helped the telecom Industry is the regulatory changes

and reforms that have been pushed for last 10 years by successive Indian governments.

According to Telecom Regulatory Authority of India (TRAI) the rate of market expansion would

increase with further regulatory and structural reforms. Even though the fixed line market share

has been dropping consistently, the overall (fixed and mobile) subscribers have risen to more

than 200 million by first quarter of 2007. The telecom reforms have allowed the foreign

telecommunication companies to enter Indian market which has still got huge potential.

International telecom companies like Vodafone have made entry into Indian market in a big way.

Currently the Indian Telecommunication market is valued at around $100 billion (Rupees

400,000 crore). Two telecom players dominate this market - Bharti Airtel with 27% market share

and Reliance Communication with 20% along with other players like BSNL (Bharat Sanchar

Nigam Limited) and AT&T. One segment of the market that has been puzzling is broadband

Internet. Despite the manner in which the country’s Internet market has been booming, India’s

move into high-speed broadband Internet access has been distinctly slow. And, while there

appears to be considerable enthusiasm amongst the population for the Internet itself, this has not

been reflected in broadband subscription numbers. In 2006 India witnessed a good surge in

broadband users with the total subscriber base in the country expanding by almost 200% to

just over 2 million by years end. Despite this surge, broadband penetration in India still

remains around only 0.2%; broadband services still account for only 25% of the total Internet

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subscriber base, still in itself comparatively low. So, if 70% of total population is rural, the scope

for growth in this Industry is unprecedented.

The Ministry of Communications and Information Technology (MCIT) is has very aggressive

plans to increase the pace of growth, targeting 250 million telephone subscribers by end-2007

and 500 million by 2010. Most of the expansion in subscribers is set to occur in rural India.

India’s rural telephone density has been languishing at around 1.9%. The subscriber addition rate

has been strong in the last 12 months but the regulatory developments will increase competition

and thus curtail the long-term growth rates of individual companies. The savings through the

setting of tower companies will partly go towards the higher capex and opex costs from more

stringent spectrum allocation norms for the incumbents. The Telecommunications sector has

been consistently adding more than 7 million subscribers for the last 6 months, a very healthy net

addition rate infact. All the private operators GSM as well as the CDMA operators have been

very consistent in their performance. The sector provides very strong revenue as well as earnings

visibility over the next 12 months. However the recent regulatory developments are seem to be

negative for the telecom companies as it will increase the number operators per circle which will

intensify competition.

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Telecom Regulatory Authority of India (TRAI)

Mission

To ensure that the interest of consumer is protected and at the same time encourage the

development of telecommunications, broadcasting and cable services in a manner and at a pace

which will enable India to play a leading role in the emerging global information society.

Role of TRAI

One of the main objectives of TRAI is to provide a fair and transparent policy environment

which promotes a level playing field and facilities fair competition. TRAI has issued from time

to time a large number of regulations, orders and directives to deal with the issues coming

before. These regulations cover a wide range of subjects including tariff, interconnection and

quality of services etc.

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Functions of TRAI

Need and timing for introduction of new service provider

Terms and condition of license to a service provider

Technological improvement in services by service provider

Maintain inter-connect agreement register

Levy fees and other charges as determined by regulations

Measures for technological development

Measures to facilitate competition and promote efficiency in the operation to facilitate

growth in industry

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SWOT Analysis of Indian Telecom Industry

A scan of the internal and external environment is an important part of the strategic planning

process. Environmental factors internal to the firm usually can be classified as strengths (S) or

weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats

(T). Such an analysis of the strategic environment is referred to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching the firm's resources and

capabilities to the competitive environment in which it operates. As such, it is instrumental in

strategy formulation and selection.

Strengths

Here we will analyze the strengths of the telecom industry as a whole. The most important

factors are:

Technology is advanced and easy to implement: For telecom industry the technology is

really advanced and more and more investment is done on technology to get world class

infrastructure and knowhow to put in this field. Recently the telecom sector is going to

add 3G spectrum as its latest upgradation.

Management Team has prior experience: The management team controlling Indian

telecom sector in really efficient. Thank goes to the IITs which produce world class

engineers. So Indian telecom sector has abundance of technological knowhow.

Weakness

The weaknesses of the Indian telecom sector are as follows.

High Cost of Infrastructure: The infrastructure cost of telecom industry is very high.

Low customer retention power: The customer retention power for telecom industry is

really low and the customer changes their service provider company very soon.

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Opportunity

Population: The population of India is really an opportunity of telecom service

providers, as the number of population without telecom service is also very high. The

industry has to target India’s huge population to grow.

Changing Population psychograph: Population psychograph is also changing.

Previously telecom service was thought as an emergency service, now it has become an

essential part of life in our country.

Increased Penetration Level: All the organizations of the industry are trying to increase

their penetration level, in other word to increase the tele-density of the country. The

urban Indian population gives a real growth prospect to the industry.

FDI: The foreign direct investment in telecom has been hiked up from 49% to 74%. This

move is positive for the sector, as it requires investments of Rs 700 – 900 million over the

next 5 years. FDI inflow by 2004 was 9950.94 cores in telecom. Countries like Europe,

Korea, and Japan telecom are likely to enter India, as India is seen as fastest growing

telecom market in world.

Threats

The treats to the industry are the following:

Government Policies – Government may provide licenses to many foreign operators,

which may already have pose a threat for the existing players in the industry.

New Technology can change the market dynamics: A lot of new technologies are

coming. Then even have the potential of changing the entire industry dynamics or even

create substitute of the telecom services existing.

Some of the examples are follows:

VOIP (Skype, Messenger etc.)

Online Chat

Email

Satellite phones

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To summarize the SWOT analysis we can draw the following framework for telecom

industry:

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Porter’s Five Forces of Indian Telecom

Industry

There is continuing interest in the study of the forces that impact on an organisation or an

industry, particularly those that can be harnessed to provide competitive advantage. The ideas

and models which emerged during the period from 1979 to the mid-1980s (Porter, 1998) were

based on the idea that competitive advantage came from the ability to earn a return on investment

that was better than the average for the industry sector (Thereby, 1998).

As Porter's 5 Forces analysis deals with factors outside an industry that influence the nature of

competition within it, the forces inside the industry (microenvironment) that influence the way in

which firms compete, and so the industry’s likely profitability is conducted in Porter’s five

forces model. A business has to understand the dynamics of its industries and markets in order to

compete effectively in the marketplace. Porter (1980) defined the forces which drive

competition, contending that the competitive environment is created by the interaction of five

different forces acting on a business. In addition to rivalry among existing firms and the threat of

new entrants into the market, there are also the forces of supplier power, the power of the buyers,

and the threat of substitute products or services. Porter suggested that the intensity of

competition is determined by the relative strengths of these forces.

The nature of competition in an industry is strongly affected by suggested five forces. The

stronger the power of buyers and suppliers, and the stronger the threats of entry and substitution,

the more intense competition is likely to be within the industry. However, these five factors are

not the only ones that determine how firms in an industry will compete – the structure of the

industry itself may play an important role. Indeed, the whole five-forces framework is based on

an economic theory know as the “Structure-Conduct-Performance” (SCP) model: the structure of

an industry determines organizations’ competitive behaviour (conduct), which in turn determines

their profitability (performance). In concentrated industries, according to this model,

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organizations would be expected to compete less fiercely, and make higher profits, than in

fragmented ones.

Main Aspects of Porter’s Five Forces Analysis

The original competitive forces model, as proposed by Porter, identified five forces which would

impact on an organization’s behavior in a competitive market. These include the following:

The rivalry between existing sellers in the market

The power exerted by the customers in the market

The impact of the suppliers on the sellers

The potential threat of new sellers entering the market

The threat of substitute products becoming available in the market

Understanding the nature of each of these forces gives organizations the necessary insights to

enable them to formulate the appropriate strategies to be successful in their market (Thurlby,

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1998). We will examine these concepts as described by Porter’s 5 force model and as applied to

Indian telecom industry simultaneously.

Force 1: The Degree of Rivalry

The intensity of rivalry, which is the most obvious of the five forces in an industry, helps

determine the extent to which the value created by an industry will be dissipated through head-

to-head competition. The most valuable contribution of Porter's “five forces” framework in this

issue may be its suggestion that rivalry, while important, is only one of several forces that

determine industry attractiveness.

This force is located at the centre of the diagram

Is most likely to be high in those industries where there is a threat of substitute products;

and existing power of suppliers and buyers in the market

Now let us understand the implication of degree of revelry in Indian telecom sector. The

dimensions of this parameter are determined by:

High Exit Barriers: In any industry, if the exit barrier is high it increases the difficulty of any

organization to leave the industry sector. So it makes any difficult to any willing to leave

company to leave the industry. The telecom industry suffers from high exit barriers, mainly due

to its specialized equipment. Networks and billing systems cannot really be used for much else,

and their swift obsolescence makes liquidation pretty difficult.

High Fixed Cost: The industry also suffers from high fixed cost which makes the entry barrier

also very high for the industry. It comes as no surprise that in the capital-intensive telecom

industry the biggest barrier to entry is access to finance. To cover high fixed costs, serious

contenders typically require a lot of cash. When capital markets are generous, the threat of

competitive entrants escalates. When financing opportunities are less readily available, the pace

of entry slows. Meanwhile, ownership of a telecom license can represent a huge barrier to entry.

6-7 players in each region

3 out of 4 BIG-Four present in each region

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Very less time to gain advantage by an innovation: Every company in this industrial sector in

investing a huge amount in research and development and marketing strategy. That is why we

see any offer launched by any company is counter attacked by other companies very soon. This

makes the industry rivalry most prominent.

Price wars: The price war is really very fierce in this industry. Price war in telecom industry has

commoditized the market that branding has taken a backseat.

Force 2: The Threat of New Entrants

Both potential and existing competitors influence average industry profitability. The threat of

new entrants is usually based on the market entry barriers. They can take diverse forms and are

used to prevent an influx of firms into an industry whenever profits, adjusted for the cost of

capital, rise above zero. In contrast, entry barriers exist whenever it is difficult or not

economically feasible for an outsider to replicate the incumbents’ position. The most common

forms of entry barriers, except intrinsic physical or legal obstacles, are as follows:

Economies of scale: In telecom industry the economies of scale exists from the supplier

side. That is why companies try to increase their subscriber base at drastic rate.

Distribution channels: Distribution channels are also providing a major determining

factor. These channels are not loyal to any company and competitors can easily access

them and make out work for them.

Customer Switching Costs: Customer switching cost is very low, as cost of new

connection is really low. And new connection offers more benefits to the customers.

Force 3: The Threat of Substitutes

The threat that substitute products pose to an industry's profitability depends on the relative

price-to-performance ratios of the different types of products or services to which customers can

turn to satisfy the same basic need. The threat of substitution is also affected by switching costs –

that is, the costs in areas such as retraining, retooling and redesigning that are incurred when a

customer switches to a different type of product or service. It also involves:

Product-for-product substitution (email for mail, fax); is based on the substitution of

need;

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Generic substitution (Video suppliers compete with travel companies);

Substitution that relates to something that people can do without (cigarettes, alcohol).

Now let us discuss this concept for telecom industry. The potential major substitutes for telecom

industry are as follows:

VOIP (Skype, Messenger etc.)

Online Chat

Email

Satellite phones

All of these technologies have a huge potential, though none of the above a major threat in

current scenario. So the telecom industry has to keep a close look on these substitutes.

Force 4: Buyer Power

Buyer power is one of forces that influence the appropriation of the value created by an industry.

The most important determinants of buyer power are the size and the concentration of customers.

Other factors are the extent to which the buyers are informed and the concentration or

differentiation of the competitors. Kippenberger (1998) states that it is often useful to distinguish

potential buyer power from the buyer's willingness or incentive to use that power, willingness

that derives mainly from the “risk of failure” associated with a product's use.

This force is relatively high where there a few, large players in the market, as it is the

case with retailers a grocery stores;

Present where there is a large number of undifferentiated, small suppliers, such as small

farming businesses supplying large grocery companies;

Low cost of switching between suppliers, such as from one fleet supplier of trucks to

another.

In the context of Indian telecom industry we can say that the following points influence

the buyer power:

Lack of differentiation among the service provider

Cut throat competition

Customer is price sensitive

Low switching costs

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Number portability to have negative impact

Force 5: Supplier Power

Supplier power is a mirror image of the buyer power. As a result, the analysis of supplier power

typically focuses first on the relative size and concentration of suppliers relative to industry

participants and second on the degree of differentiation in the inputs supplied. The ability to

charge customers different prices in line with differences in the value created for each of those

buyers usually indicates that the market is characterized by high supplier power and at the same

time by low buyer power.

In the drawback of Indian telecom industry the following should be kept in mind:

Large number of suppliers: The industry basically has a large number of suppliers,

which helps them to choose from a lot of options. So they try to select the best option to

deliver the value to the customers and to have a competitive advantage from their

competitor.

Shared tower infrastructure: Technology has helped them to share the tower

infrastructure. This basically helps them to reduce the initial investment a lot.

Limited pool of skilled managers and engineers especially those well versed in the latest.

Medium cost of switching since changing their hardware would lead to additional cost in

modifying the architecture.

Overall influence on the industry – medium.

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Major Players in Indian Telecom Industry

TOP FIVE COMPANIES:

The Top five companies, on the basis of ‘Market Share’ as on 31st January, 2009 are:

1. Bharti Airtel Ltd.

2. Reliance Communications Ltd.

3. Vodafone Essar Ltd.

4. BSNL

5. Idea Cellular + Spice

~ 26 ~

BHARTI AIRTEL LTD.

Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises. The Bharti Group has

a diverse business portfolio and has created global brands in the telecommunication sector. Airtel

comes from Bharti Airtel Limited, India’s largest integrated and the first private telecom services

provider with a footprint in all the 23 telecom circles. Bharti Airtel since its inception has been at

the forefront of technology and has steered the course of the telecom sector in the country with

its world class products and services. The businesses at Bharti Airtel have been structured into

three individual strategic business units (SBU’s) - Mobile Services, Airtel Telemedia Services &

Enterprise Services. The mobile business provides mobile & fixed wireless services using GSM

technology across 23 telecom circles while the Airtel Telemedia Services business offers

broadband & telephone services in 95 cities and has recently launched India's best Direct-to-

Home (DTH) service, Airtel digital TV. The Enterprise services provide end-to-end telecom

solutions to corporate customers and national & international long distance services to carriers.

All these services are provided under the Airtel brand.

The company served an aggregate of 88,270,194 customers as of December 31, 2008; of whom

85,650,733 subscribed to GSM services and 2,619,461 use the Telemedia Services either for

voice and/or broadband access delivered through DSL. Bharti Airtel is the largest wireless

service provider in the country, based on the number of subscribers as of December 31, 2008.

They also offer an integrated suite of telecom solutions to their enterprise customers, in addition

to providing long distance connectivity both nationally and internationally. They have recently

forayed into media by launching their DTH and IPTV Services. All these services are rendered

under a unified brand "Airtel".

~ 27 ~

The company also deploys, owns and manages passive infrastructure pertaining to telecom

operations under its subsidiary Bharti Infratel Limited. Bharti Infratel owns 42% of Indus

Towers Limited. Bharti Infratel and Indus Towers are the two top providers of passive

infrastructure services in India.

Company shares are listed on The Stock Exchange, Mumbai (BSE) and The National Stock

Exchange of India Limited (NSE).

RELIANCE COMMUNICATIONS LTD.

Reliance Communications is the flagship company of the Anil Dhirubhai Ambani Group

(ADAG) of companies. Listed on the National Stock Exchange and the Bombay Stock

Exchange, it is India’s leading integrated telecommunication company with over 71 million

customers.

Their business encompasses a complete range of telecom services covering mobile and fixed line

telephony. It includes broadband, national and international long distance services and data

services along with an exhaustive range of value-added services and applications. Our constant

endeavour is to achieve customer delight by enhancing the productivity of the enterprises and

individuals we serve.

Reliance Mobile (formerly Reliance India Mobile), launched on 28 December 2002, coinciding

with the joyous occasion of the late Dhirubhai Ambani’s 70th birthday, was among the initial

initiatives of Reliance Communications. It marked the auspicious beginning of Dhirubhai’s

dream of ushering in a digital revolution in India. Today, the company can proudly claim that

~ 28 ~

they were instrumental in harnessing the true power of information and communication, by

bestowing it in the hands of the common man at affordable rates.

They endeavour to further extend their efforts beyond the traditional value chain by developing

and deploying complete telecom solutions for the entire spectrum of society. It was established

in the year 2004 as Reliance Infrastructure Developers Private Limited, Reliance

Communications started laying 60,000 route kilometers of a pan-India fiber optic backbone with

high capacity, integrated (wireless and wireline), convergent (voice, data and video) digital

network and to offer services spanning the entire infocomm value chain. It is capable of

delivering a range of services spanning the entire infocomm (information and communication)

value chain, including infrastructure and services for enterprises as well as individuals,

applications, and consulting.

VODAFONE ESSAR LTD.

Vodafone Essar in India is a subsidiary of Vodafone Group Plc and commenced operations in

1994 when its predecessor Hutchison Telecom acquired the cellular license for Mumbai.

Vodafone Essar now has operations in 22 circles with over 65.92 million customers**. The

company is a joint venture of Essar Communication Holdings Ltd and the UK-based Vodafone

Group. Vodafone has partnered with the Essar Group as their principal joint venture partner for

the Indian market. They are in the business of cellular telephony. Over the years, Vodafone

Essar, under the Hutch brand, has been named the ‘Most Respected Telecom Company’, the

‘Best Mobile Service in the country’ and the ‘Most Creative and Most Effective Advertiser of

the Year’.

~ 29 ~

Vodafone is the world’s leading international mobile communications company. It currently has

equity interests in 27 countries across 5 continents and 40 partner networks with over 289

million proportionate customers worldwide. Vodafone has partnered with the Essar Group as its

principal joint venture partner for the Indian market.

Essar Global Limited (EGL) is a diversified business group spanning the manufacturing and

services sectors of Steel, Energy, Power, Communications, Shipping & Logistics, and Projects.

The group has operations and investments in India, Canada, USA, Africa, the Middle East, the

Caribbean and South East Asia and employs 30,000 people worldwide.

Vodafone Essar Ltd provides services like 2G, which are based on 1800 Mhz and 900Mhz GSM

digital technology. They offers voice and data services. In addition, they offers postpaid

connections activation, prepaid SIM cards and recharge coupons sale, service

activation/deactivation, postpaid tariff plan change, customer query resolution, prepaid/postpaid

SIM card replacement and upgradation, mobile number change, and information on and

subscription of value added services through stores.

BHARAT SANCHAR NIGAM LTD.

Bharat Sanchar Nigam Ltd. formed in October, 2000, is World's 7th largest Telecommunications

Company providing comprehensive range of telecom services in India: Wireline, CDMA mobile,

GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN

Services etc. Within a span of five years it has become one of the largest public sector unit in

India.

~ 30 ~

It has about 47.3 million line basic telephone capacity, 4 million WLL capacity, 20.1 Million

GSM Capacity, more than 37382 fixed exchanges, 18000 BTS, 287 Satellite Stations, 480196

Rkm of OFC Cable, 63730 Rkm of Microwave Network connecting 602 Districts, 7330

cities/towns and 5.5 Lakhs villages.

BSNL is the only service provider, making focused efforts and planned initiatives to bridge the

Rural-Urban Digital Divide ICT sector. In fact there is no telecom operator in the country to beat

its reach with its wide network giving services in every nook & corner of country and operates

across India except Delhi & Mumbai.

BSNL is numero uno operator of India in all services in its license area. The company offers vide

ranging & most transparent tariff schemes designed to suite every customer.

BSNL cellular service, CellOne, has more than 17.8 million cellular customers, garnering 24

percent of all mobile users as its subscribers. That means that almost every fourth mobile user in

the country has a BSNL connection. In basic services, BSNL is miles ahead of its rivals, with

35.1 million Basic Phone subscribers i.e. 85 per cent share of the subscriber base and 92

percent share in revenue terms.

BSNL has more than 2.5 million WLL subscribers and 2.5 million Internet Customers who

access Internet through various modes viz. Dial-up, Leased Line, DIAS, Account Less Internet

(CLI). BSNL has been adjudged as the NUMBER ONE ISP in the country. BSNL has set up a

world class multi-gigabit, multi-protocol convergent IP infrastructure that provides convergent

services like voice, data and video through the same Backbone and Broadband Access Network.

At present there are 0.6 million DataOne broadband customers.

~ 31 ~

IDEA CELLULAR LTD.

IDEA Cellular is a publicly listed company, having listed on the Bombay Stock Exchange (BSE

and the National Stock Exchange (NSE) in March 2007. Idea Cellular Ltd. is India's leading

GSM mobile services operator. It has licenses to operate in 11 circles. The company has a

customer base of over 17 million. It is the first cellular company to launch music messaging with

Cellular Jockey, Background Tones, Group Talk, a voice portal with Say IDEA and a complete

suite of mobile email Services.

A brand known for many firsts, Idea was the first to launch GPRS and EDGE in the country.

Idea has received international recognition for its path-breaking innovations when it won the

GSM Association Award for "Best Billing and Customer Care Solution" for 2 consecutive years.

IDEA Cellular is part of the Aditya Birla Group, India's first truly multinational corporation. The

group operates in 25 countries, and is anchored by over 1,25,000 employees belonging to 25

nationalities.

The combined holding of the Aditya Birla Group companies in Idea stands at 98.3 per cent. Mr.

Kumar Mangalam Birla has been named the Chairman of the company.

The Indian telecommunications market for mobile services is divided into 22 "Service Areas"

classified into "Metro", Category "A", Category "B" and Category "C" service areas by the

Government of India. These classifications are based principally on a Service Area's revenue

generating potential.

~ 32 ~

Customer Service and Innovation are the drivers of this Cellular Brand. A brand known for their

many firsts, IDEA is the only operator to launch General Packet Radio Service (GPRS) and

EDGE in the country. IDEA has seen phenomenal growth since its inception, the company's

footprint idea is to first achieve critical mass, then drill deep instead of

spreading thin, however, does not increasing geographic footprint only, it also drills deep and

successfully attempts to provide excellent network coverage in all its circles of operations.

~ 33 ~

Advertising – A Powerful Tool

Most of us feel that advertising is, after all, for the marketer, a powerful persuasive tool for

creating a demand for his product. Consumers apparently feel that they have nothing to gain

from these advertisements. Most of us do not have cent percent faith in the correctness of the

advertising message. We have some sort of predetermined impression that advertisements are

exaggerations, highlighting the benefits of the product which are not too important while

concealing the drawbacks which are more important. In short, we do not take any advertisement

message seriously and have stereotyped reaction to almost all the advertisements. The basic

purpose of advertisement to communicate effectively with the target market itself is not

achieved.

Some economists have argued that advertising creates product differentiation, as a result of

which demand becomes increasingly inelastic; that, in fact it does nothing but to replace price

competition, by advertising. It is possible that the gain in eliminating price competition by

covering a market segment for the advertised product may be much more than the expenditure

incurred on advertising. Large firms have the power of huge money; they spend it on advertising,

particularly when they introduce a product with a varying differentiation, which enables them to

capture a substantial market. Not only in such pre-empting of a market possible; but such

advertising has the power to create a barrier for new firms or a product to enter the market in

competition. The result is that big companies continue to enjoy a large market share in a

monopolistic competitive situation, getting high prices and high profits which, again, enable

them to spend huge sums on advertising. And so a vicious circle develops.

The power of advertising is so great that some authors have argued that it deprives consumers of

their discretion in the market place and makes it possible for suppliers to manage demand. John

Kenneth Galbraith, in his monumental work, The New Industrial Estate, has observed:

~ 34 ~

“The control or management of demand is, in fact, a vast and rapidly growing industry itself. It

embraces a huge network of communications, a great array of merchandising and selling

organizations, nearly the entire advertising industry, numerous ancillary research, training and

other related services, and much more. In everyday parlance, this great machine and the demand

and varied talents that it employs, are said to be engaged in selling goods. In less ambiguous

language, it means that it is engaged in the management of those who buy goods.”

In this criticism of advertising, economists assume that market response is directly proportional

to the amount spent on advertising. The bigger the advertising budget, the greater is the market

manipulative power available with the marketer. Another assumption is that advertising is too

expensive, not really within the capacity of other medium and small-size firms. The third

assumption that once a company or firm takes the lead, others are forbidden and cannot take

away or snatch the market from it.

No doubt market response has a relationship with the dose of advertising; even so, advertising

alone is not the only cause of the response. There are other equally important criteria which

affect the buying decision. These are product quality, its availability and sales promotion. On a

larger basis, therefore, advertising may be blamed for decreasing competition; but certainly not

on a permanent basis. The assumption that advertising is too expensive cannot withstand a

critical analysis. Due to technological advancement and the development of various media,

advertising is commonly used by manufacturers and marketers.

It is evident, therefore, that though the criticism of advertising may be occasionally justified in

the short period, it cannot be sustained on a regular basis. No doubt, advertising helps in building

up the reputation of a particular brand; but it is not advertising alone, it is product performance

that also matters. Yes, advertising does enhance the value of the product to its consumers to a

good extent, if it is properly done. It influences the perception of consumers about the product

and creates a desire to buy it. But this would happen only if consumers believe in the benefits

promised in the advertisement of the product and its usage confirms their belief. This is the way

advertising helps in value addition to a product or service.

~ 35 ~

Role of Advertising in Modern Business World

Advertising is primarily a means by which sellers communicate to prospective buyers the worth

of their goods and services. Advertising is a basic tool of marketing for stimulating demand and

for influencing the level and character of the demand. It has economic, social and psychological

functions.

ECONOMIC FUNCTION: All that advertisement has to do is to sell a product or service. The

advertisement accomplishes by communicating properly and effectively, by communicating to

the right people, by communicating the right message, put across through brilliant and persuasive

language, making use of appeals to different human motives. Advertisements sometimes do the

sales job in a subtle and indirect manner. They incline us favorably to the products, they affect

our attitudes. So advertising performs the economic function by being an art of persuasion. It

also is helped by a science of layout, visualization, print reproduction, special effects on films

etc. Advertising establishes a direct rapport with the buyer, with no middlemen in the way.

SOCIAL FUNCTION: Advertising has affected not the core cultural values but the subsidiary

cultural values. For example, to get married is core cultural value. Advertising cannot effectively

change it by telling people that you do not marry. Yes, to marry late and not an early age is a

subsidiary cultural value. Advertisement can definitely affect it.

Advertisement is a mirror of the society in which it operates. It reflects the cultural values of the

society. Some argue that advertising debases our cultural standards. There are many factors

which affect culture and get affected by them – schools, colleges, families, museums, churches

etc. Successful advertising is consistent with the cultural values of a given society. Yes, it can

transfer some cultural values of one society to another society at a given point of time. Its cross-

cultural impact will depend upon the universalization of appeal.

PSYCHOLOGICAL FUNCTIONS: Advertising is closely linked to consumer behaviour. So

it affects personality of the consumer, his concept of self, his attitudes, beliefs and opinions, his

~ 36 ~

life cycle and life style etc. Advertising appeals to our physiological and psychological motives.

Its appeals may be rational or emotional.

Managing Advertising Decisions

Delivering an effective marketing message through advertising requires many different decisions

as the marketer develops their advertising campaign. For small campaigns, that involve little

creative effort, one or a few people may handle the bulk of the work. In fact, the Internet has

made do-it-yourself advertising an easy to manage process and has especially empowered small

businesses to manage their advertising decisions. As we will see, not only can small firms handle

the creation and placement of advertisements that appear on the Internet, new services have even

made it possible for a single person to create advertisements that run on local television. For

instance, a company called SpotRunner allows users to select from a list of high-quality

television ads that can be customized and then placed within local cable television programming.

For larger campaigns the skills needed to make sound advertising decisions can be quite varied

and may not be easily handled by a single person. While larger companies manage some

advertising activities within the company, they are more likely to rely on the assistance of

advertising professionals, such as those found at advertising agencies, to help bring their

advertising campaign to market.

Types of Advertising

Print Advertising – Newspapers, Magazines, Brochures, Fliers

The print media have always been a popular advertising medium. Advertising products via

newspapers or magazines is a common practice. In addition to this, the print media also offers

options like promotional brochures and fliers for advertising purposes. Often the newspapers and

the magazines sell the advertising space according to the area occupied by the advertisement, the

position of the advertisement (front page/middle page), as well as the readership of the

publications. For instance an advertisement in a relatively new and less popular newspaper

~ 37 ~

would cost far less than placing an advertisement in a popular newspaper with a high readership.

The price of print ads also depend on the supplement in which they appear, for example an

advertisement in the glossy supplement costs way higher than that in the newspaper supplement

which uses a mediocre quality paper.

Outdoor Advertising – Billboards, Kiosks, Tradeshows and Events

Outdoor advertising is also a very popular form of advertising, which makes use of several tools

and techniques to attract the customers outdoors. The most common examples of outdoor

advertising are billboards, kiosks, and also several events and tradeshows organized by the

company. The billboard advertising is very popular however has to be really terse and catchy in

order to grab the attention of the passersby. The kiosks not only provide an easy outlet for the

company products but also make for an effective advertising tool to promote the company’s

products. Organizing several events or sponsoring them makes for an excellent advertising

opportunity. The company can organize trade fairs, or even exhibitions for advertising their

products. If not this, the company can organize several events that are closely associated with

their field. For instance a company that manufactures sports utilities can sponsor a sports

tournament to advertise its products.

Broadcast advertising – Television, Radio and the Internet

Broadcast advertising is a very popular advertising medium that constitutes of several branches

like television, radio or the Internet. Television advertisements have been very popular ever since

they have been introduced. The cost of television advertising often depends on the duration of

the advertisement, the time of broadcast (prime time/peak time), and of course the popularity of

the television channel on which the advertisement is going to be broadcasted. The radio might

have lost its charm owing to the new age media however the radio remains to be the choice of

small-scale advertisers. The radio jingles have been very popular advertising media and have a

large impact on the audience, which is evident in the fact that many people still remember and

enjoy the popular radio jingles.

Covert Advertising – Advertising in Movies

~ 38 ~

Covert advertising is a unique kind of advertising in which a product or a particular brand is

incorporated in some entertainment and media channels like movies, television shows or even

sports. There is no commercial in the entertainment but the brand or the product is subtly (or

sometimes evidently) showcased in the entertainment show. Some of the famous examples for

this sort of advertising have to be the appearance of brand Nokia which is displayed on Tom

Cruise’s phone in the movie Minority Report, or the use of Cadillac cars in the movie Matrix

Reloaded.

Surrogate Advertising – Advertising Indirectly

Surrogate advertising is prominently seen in cases where advertising a particular product is

banned by law. Advertisement for products like cigarettes or alcohol which are injurious to heath

are prohibited by law in several countries and hence these companies have to come up with

several other products that might have the same brand name and indirectly remind people of the

cigarettes or beer bottles of the same brand. Common examples include Fosters and Kingfisher

beer brands, which are often seen to promote their brand with the help of surrogate advertising.

Public Service Advertising – Advertising for Social Causes

Public service advertising is a technique that makes use of advertising as an effective

communication medium to convey socially relevant messaged about important matters and social

welfare causes like AIDS, energy conservation, political integrity, deforestation, illiteracy,

poverty and so on. David Oglivy who is considered to be one of the pioneers of advertising and

marketing concepts had reportedly encouraged the use of advertising field for a social cause.

Oglivy once said, "Advertising justifies its existence when used in the public interest - it is much

too powerful a tool to use solely for commercial purposes.". Today public service advertising has

been increasingly used in a non-commercial fashion in several countries across the world in

order to promote various social causes. In USA, the radio and television stations are granted on

the basis of a fixed amount of Public service advertisements aired by the channel.

Celebrity Advertising

~ 39 ~

Although the audience is getting smarter and smarter and the modern day consumer getting

immune to the exaggerated claims made in a majority of advertisements, there exist a section of

advertisers that still bank upon celebrities and their popularity for advertising their products.

Using celebrities for advertising involves signing up celebrities for advertising campaigns, which

consist of all sorts of advertising including, television ads or even print advertisements.

Advertising Trends in Indian Telecom

The way telecom firms advertise, gives an approximate idea about the telecom trends. I would

try to uncover some of them, which come to my mind. At the initial launch of the mobile

services, they were advertised as lifestyle products. The message that sought to be conveyed was

that if you have a mobile phone, you have arrived in life. A few well-healed people could afford

the high call rates at that time. It was in no way for the masses. I am sure that the mobile

companies made a large profit out of it. Perhaps for the first time, Indians were exposed to

concepts alien to them: Customer Care Support. It saw a booming of the ancillary services and

fresh graduates, stunted in mental development though, came out in droves for the well-paid

jobs.

Airtel then sought the services of Sachin Tendulkar. He was the brand ambassador and saw his

earnings sharply increasing. I saw his picture everywhere exhorting me buy the mobile prepaid

card. After the initial publicity passed away, A.R. Rahman gave his now famous tune. All the

other companies have variously tried other gimmicks to sell their connections.

However, the landscape changed after Reliance came in the mobile services. Mukesh Ambani

was seen telling people about his father’s dream. The initial launch was lackluster. With the

launch of the prepaid services, the punch line was “mujhme hai who baat” or “I have that thing!”

I wonder how many people actually signed up after those ads. I believe that it was solely because

of the Monsoon Hungama that Reliance was able to ramp up its numbers. Then came the ad line

“Kar lo duniya muthi mein”. (Have the world in your fist). I remember that this became the butt

of dirty jokes on the GSM networks! So much for imagination of creative heads of the ad

agency.

~ 40 ~

The icing on the cake goes to Hutch. They designed the simple ad with the kid and cute Chinese

Pug. It was a hit of all sorts. It conveyed the effectiveness of the message succinctly. I believe

that it drove Hutch connections across the places where it offered its services. However, it was

considered too elitist for the masses. The advertisement should be able to convey the message

effectively; one with which people could identify with. In this regard, BSNL could claim

something. BSNL advertisements depicted typically government mentality for awarding the

contract to lowest in the tender process. The quality clearly shows. Is there anyway people could

identify themselves with that advertisements? What of those places where BSNL is the sole

service provider?

As the title goes, advertising trends are reflective of the current scenario in telecom. Airtel has

been advertising its group card labeled as Friends. In fact, until now, the market was treated as

homogenous. Over the period, classification has been sought to target the specific customers

with specific needs. Airtel took the lead in announcing Senior citizen cards targeted at those

above 60. The Friends card is for those who wish to restrict themselves to their group with low

calling rates and some free messages.

Reliance has realized early on about targeting the businesses. Its offer of flat rate for making

STD calls to anyone across its network is unparalleled. This way it can ensure that there would

be higher converts towards it services. R-Connect is its portal that differentiated Reliance early

on from other operators. It knows that future revenues are going to come from value added

services. This way it has foreseen the development in the industry.

Following this, Airtel introduced its Airtel Live! I guess so have the other operators across board.

The voice calls would not yield much as much as revenue as would the value added services.

Hence, for the same reason they have introduced value added cards, which would help to

download ring tones and other fancy stuff.

This is the reason I have always insisted that Telecom operators should get bullish on data

services. 3G mobile services look good as technology demonstrators. Until the time, the prices

for the 3G enabled handsets fall down to manageable levels, it would not take off. I believe that

it takes up a large chunk of the scarce spectrum, which does not make any sense to introduce.

~ 41 ~

WAP and GPRS were heavily promoted but have been more or less non-starters. The real

differentiator would be the quality of services, cheap offering if these companies have to venture

in the rural areas and the reach of the network.

In this regard, the division of India in circles is not in the right spirit. It should be taken as a

homogenous land mass. The day is not far when it would be local call to call anywhere across

the nation. Reliance has made this possible to some extent.

Advertising by Telecom Industry on TV

Key Findings:

2007

Telecom sector advertising on TV grew by 61 per cent during 2007 compared to 2006.

Telecommunication Services segment had more than 60 per cent share of overall

Telecom sector advertising on TV.

Telecommunication Services has seen a rise of 108 per cent in TV advertising, whereas

Telecommunication Equipments saw a rise of 17 per cent during 2007 over 2006.

Bharti Airtel Ltd was the number one advertiser under Telecommunication Services and

Nokia Corporation led Telecommunication Equipments advertising on TV during 2007.

2008

TV advertising of Telecom sector saw a rise of 99 per cent during January - August 2008

compared to January - August 2007.

'Telecommunication Services' garnered a high share of Telecom sector advertising on TV

during January - August 2008.

TV advertising of 'Telecommunication Equipments' saw a growth of 45 per cent and that

of 'Telecommunication Services' grew by 127 per cent during January - August 2008.

~ 42 ~

'Nokia Corporation' leads in advertising of 'Telecommunication Equipments' and '

Vodafone Essar Ltd' was number one advertisers for 'Telecommunication Services' on

TV during January - August 2008.

'R Madhavan' had the maximum ad volumes of Celebrity Endorsement of Telecom sector

on TV during January - August 2008.

2009

Telecom sector has seen a decline of 16 per cent in its TV ad volumes during Jan - Mar

'09 compared to Jan - Mar '08.

High share of 'telecommunication services' advertising on TV during Jan-Mar '09.

'Sony Ericsson (India)' was the top advertisers under 'telecommunication equipments' and

'Bharti Airtel Ltd' leads in 'telecommunication services' advertising on TV during Q1 '09.

'Sony Ericsson W595' and 'Sony Ericsson F305' were top two new brands advertised

under 'telecommunication equipments' on TV during Q1 '09.

Virgin vGlide Phones (slider) topped the chart of new 'telecommunication services'

advertised on TV during Q1 '09.

The segregation of the telecom sector

~ 43 ~

Growth in Ad Volumes of Telecom Sector

2009

~ 44 ~

16 per cent drop in telecom sector advertising on TV during first quarter of 2009

compared to same period in 2008

Share of segments of Telecom sector

2009

~ 45 ~

With 87 per cent share 'telecommunication services' leads in advertising of 'telecom

sector' on TV, followed by 'telecommunication equipments' and 'corporate brand image'

with 11 per cent and two per cent share respectively during Q1 '09.

Growth in ad volumes of segments of Telecom

sector

~ 46 ~

2009

'Telecommunication services' have seen a decline of 7 per cent in its TV ad volumes

during Jan - Mar '09 compared to Jan - Mar '08.

TV advertising of 'telecommunication equipments' recorded a drop of 56 per cent during

Q1 '09 compared to Q1 '08.

Top five advertisers under the Telecom segments

~ 47 ~

2009

'Bharti Airtel Ltd', 'Vodafone Essar Ltd' and 'Bharat Sanchar Nigam Ltd' the top three key

players of 'telecommunication services' together accounted for 65 per cent share on TV

during Q1 '09.

During Q1 '09, top three advertiser together contributed for 83 per cent of overall

'telecommunication equipment' TV advertising share viz. 'Sony Ericsson (India)', 'Nokia

Corporation' and 'LG Electronics India Ltd'.

~ 48 ~

New Brands advertised in Telecom Equipments and

Services

2009

Top three 'telecom services' advertised on TV were 'Virgin vGlide Phones (slider)',

'Vodafone Blackberry Storm' and 'Apple Music Caller Tunes' during Q1 '09.

Three brands of 'BSNL' and two of 'Etisalat' made to the top 10 list of new brands of

'telecom services'.

'Sony Ericsson W595 ', 'Sony Ericsson F305' and 'Samsung Guru 1410' were the top three

new 'telecommunication equipments' advertised on TV during Q1 '09.

~ 49 ~

Top 10 list of new brands of 'telecommunication equipments' advertised on TV,

comprised of three brands of 'Sony Ericsson' and two were of 'HTC Corporation' during

Q1 '09

Top advertisers with Celebrity endorsement ad

volumes

2009

Top three celebrities endorsing telecom products on TV during the first quarter of 2009

were 'Deepika Padukone', 'Saif Ali Khan' and 'Kareena Kapoor'

~ 50 ~

Data Analysis and Interpretations

The main area of the study is the Advertising in Telecom Industry in India and its Impact on Customers. For this purpose I conducted a survey of 200 people in AHMEDABAD city.

Research Design:

The research design is Descriptive studies. Descriptive studies are well structured, they tend to

be rigid and its approach cannot be changed every now and then.

Descriptive studies are undertaken in many circumstances:

1. When the researcher is interested in knowing the characteristics of certain groups such as age ,

profession.

2. When the researcher is interested in knowing the proportion of people in given population who

have behaved in a particular manner, making projection of certain things.

The objective of this kind of study is to answer the why, who, what ,when and how of the subject

under consideration.

I have taken descriptive because my research includes the knowing the behavior of customer

towards advertisement. I have analyzed how people of various age group respond to different

advertising or their perception towards advertisement. Also my survey is related to companies

like Vodafone, Airtel, Reliance communications, BSNL and Idea cellular.

Types of questions:

OPEN ENDED:

~ 51 ~

They give the respondents complete freedom to decide the form , length and detail of the answer.

Open questions are preferred when the researchers is interested in knowing what is upper most in

the mind of respondents.

DICHOTOMOUS:

This type of questions have only two type of answer, yes or no. true or false etc.

MULTIPLE CHOICE QUESTIONS:

In the case of multiple choice question the respondents is offered two or more choices. The researcher exhausts all the possible choices and the respondent has to indicate which one is applicable in this case.

~ 52 ~

Gender: (a) Male (b) Female

GENDER VALUE PERCENTAGE

MALE 118 59%

FEMALE 82 41%

MALE59%

FEMALE41%

GENDER

MALEFEMALE

Out of 200 respondents, 118 were male and 82 were female.

~ 53 ~

Age: (a) 15-25 (b) 26-35 (c) 36-45 (d) Above 45

AGE VALUE PERCENTAGE

15-25 64 32%

26-35 60 30%

36-45 56 28%

Above 45 20 10%

45 AND ABOVE10%

36-4528%

15-2532%

26-3530%

AGE

45 AND ABOVE36-4515-2526-35

~ 54 ~

Out of 200 respondents, 64 were between the age of 15-25, 60 were between the age of 26-35, 56 were between the age of 36-45 and 20 were above 45.

Education: (a) Matriculate (b) Intermediate (C) Graduation (d) Postgraduate

EDUCATION VALUE PERCENTAGE

MATRICULATE 28 14%

INTERMEDIATE 40 20%

GRADUATE 72 36%

POSTGRADUATE 60 30%

Matricu-late14%

Intermediate20%

Graduate36%

Postgraduate30%

EDUCATION

MatriculateIntermediateGraduatePostgraduate

~ 55 ~

Out of 200 respondents 28 were matriculate, 40 were intermediate, 72 were graduate and 60 were postgraduate.

Who is your current service provider?

(a) Airtel (b) Vodafone (c) Reliance (d) BSNL (e) Idea (f) other

CURRENT SERVICE PROVIDER

VALUE PERCENTAGE

AIRTEL 50 25%

VODAFONE 34 17%

RELIANCE 36 18%

BSNL 26 13%

IDEA 22 11%

OTHER 32 16%

~ 56 ~

RELIANCE18%

VODAFONE17%

AIRTEL25%

BSNL13%

IDEA11%

OTHER16%

CURRENT SERVICE PROVIDER

RELIANCEVODAFONEAIRTELBSNLIDEAOTHER

Out of 200 respondents 50 were using Airtel, 34 were using Vodafone, 36 were using Reliance,

26 were using BSNL, 22 were using Idea and 32 were using others.

For how long you are using this mobile connection?

(a) Less than 6 months. (b) 6 to 12 months. (c) Above 12 months.

TIME PERIOD VALUE PERCENTAGE

LESS THAN 6 MONTHS 22 11%

6 TO 12 MONTHS 56 28%

ABOVE 12 MONTHS 120 61%

~ 57 ~

LESS THEN 6 MONTHS

11%

6-12 MONTHS28%MORE THAN 12

MONTHS61%

TIME PERIOD OF CONNECTION

LESS THEN 6 MONTHS6-12 MONTHSMORE THAN 12 MONTHS

Out of 200 respondents 22 were using the current connection for less than 6 months, 56 were

using it from 6-12 months and 120 were using it from more than 1 year.

What were the reasons for choosing this mobile connection?

(a) Recommended by friends or relatives. (b) Recommended by retailers.

(c) Brand image (d) Advertisement

BUYING FORCE VALUE PERCENTAGE

FRIENDS / RELATIVES 76 38%

RETAILERS 24 12%

BRAND IMAGE 16 8%

ADVERTISEMENT 84 42%

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FRIENDS RELATIVE38%

RETAILERS12%

BRAND IMAGE8%

ADVERTISEMENT42%

BUYING FORCE

FRIENDS RELATIVERETAILERSBRAND IMAGEADVERTISEMENT

Out of 200 respondents 76 were influenced by friends and relatives, 24 were influenced by retailers, 16 were influenced by brand image and 84 were influenced by advertisements.

While purchasing a connection advertising plays any role? (a) Yes (b) No

ADVERTISING IN PURCHASE

VALUE PERCENTAGE

YES 168 84%

NO 32 16%

~ 59 ~

YES84%

NO16%

ROLE OF ADVERTISING IN PURCHASE

YESNO

Out of 200 respondents 168 agreed that advertisements play a role in making purchase decision

and 32 did not agree on that.

From where do you watch advertisements the most?

(a) Television (b) Radio (c) Newspaper (d) Magazines (e) Other

SOURCE OF ADVERTISEMENT

VALUE PERCENTAGE

TELEVISION 110 55%

RADIO 6 3%

NEWSPAPER 50 25%

~ 60 ~

MAGAZINE 14 7%

OTHER 20 10%

TELEVISION55%

RADIO3%

NEWSPAPERS25%

MAG-AZINES

7%

OTHERS10%

SOURCE OF ADVERTISEMENT

TELEVISIONRADIONEWSPAPERSMAGAZINESOTHERS

Out of 200 respondents 110 replied Television, 6 replied Radio, 50 replied Newspapers, 14

replied Magazines and 20 replied Others.

Which telecommunication company has good advertising?

(a) Airtel (b) Vodafone (c) Reliance (d) BSNL (e) Idea (f) other

GOOD ADVERTISING VALUE PERCENTAGE

AIRTEL 50 25%

VODAFONE 64 32%

RELIANCE 30 15%

~ 61 ~

BSNL 16 8%

IDEA 40 20%

OTHER 0 0%

RELIANCE15%

VODAFONE33%

AIRTEL25%

IDEA20%

BSNL8%

GOOD ADVERTISING

RELIANCEVODAFONEAIRTELIDEABSNLOTHER

Out of 200 respondents 50 liked the advertisements of Airtel, 64 liked advertisements of

Vodafone, 30 liked the advertisements of Reliance, 16 liked the advertisements of BSNL and 40

liked the advertisements of IDEA.

Do you think that advertisement made by company informs you about their products?

(a) Yes (b) No (c) Undecided

INFORMATION IN ADS VALUE PERCENTAGE

YES 140 70%

NO 48 24%

~ 62 ~

UNDECIDED 12 6%

YES70%

NO24%

UNDECIDED6%

INFORMATION IN ADVERTISEMENTS

YESNOUNDECIDED

Out of 200 respondents 140 were in favor of that advertisements provides information about the

products, 48 were not in favor of that and 12 were not able to decide.

Based on advertisements made by company, would you like to go for more connections for

you or your family in future?

(a) Yes. (b) No. (c) Undecided.

ADS FOR REFERENCE VALUE PERCENTAGE

~ 63 ~

YES 148 74%

NO 44 22%

UNDECIDED 8 4%

YES74%

NO22%

UNDECIDED4%

ADVERTISEMENTS AS FUTURE REFERENCE

YESNOUNDECIDED

Out of 200 respondents 148 agreed that they would buy connection on the basis of advertisement made by companies, 44 did not agree and 8 were not able to decide.

Findings

A very healthy majority believes that advertisements play a role while making purchase

decision for new connection. So the companies should handle the advertising properly

and should try to deliver the information properly.

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In telecom industry the most important factor which affects the purchase decision of the

customers is advertisement. Suggestions of friends and relatives also plays major role in

this. So the companies should take care of the existing customers so that they can be

recommended to others.

Majority of the people likes to watch advertisements on television. And after television

people rated newspapers. So the companies should focus more on television ads and

newspaper ads.

Majority of the people like Vodafone advertisements more than others. After that Airtel

and Idea comes. So the other companies should try to make advertisements which can

connect to the customers.

Majority of the people believe that advertisements provide information about the

products. So the companies should try to deliver all the information about the plans and

offers through advertisements.

Majority of the people wants to buy the connections for family and friends on the basis of

advertisements. So advertisements should be given more focus and importance by the

telecom companies.

Annexure

QUESTIONNAIRE

1. Name _________________________________________

~ 65 ~

2. Gender: (a) Male (b) Female

3. Age: (a) 15-25 (b) 26-35 (c) 36-45 (d) Above 45

4. Education: (a) Matriculate (b) Intermediate (C) Graduation (d) Postgraduate

5. Who is your current service provider?

(a) Airtel (b) Vodafone (c) Reliance (d) BSNL (e) Idea (f) other

6. For how long you are using this mobile connection?

(a) Less than 6 months. (b) 6 to 12 months. (c) Above 12 months.

7. What were the reasons for choosing this mobile connection?

(a) Recommended by friends or relatives.

(b) Recommended by retailers.

(c) Brand image

(d) Advertisement

8. While purchasing a connection advertising plays any role? (a) Yes (b) No

9. From where do you watch advertisements the most?

(a) Television (b) Radio (c) Newspaper (d) Magazines (e) Other

10. Which telecommunication company has good advertising?

(a) Airtel (b) Vodafone (c) Reliance (d) BSNL (e) Idea (f) other

11. Do you think that advertisement made by company informs you about their products?

(a) Yes (b) No (c) Undecided

~ 66 ~

12. Based on advertisements made by company , would you like to go for more connections

for you or your family in future?

(a) Yes. (b) No. (c) Undecided.

References

Faculty Guide: Dr. SUSHANT NAGPAL

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Websites:

www.vodafone.in

www.airtel.in

www.rcom.co.in

www.bsnl.co.in

www.ideacellular.com

www.google.com

Newspapers:

Dainik Bhaskar

Rajasthan Patrika

The Times Of India

Books:

Foundations of advertising by S.A. Chunawala & K.C. Sethia

Advertising management by Rajeev Batra & John Myers

Advertising and promotion by George & Michal Belch

Advertising, Marketing and Sales promotion by Devendra Thakur

~ 68 ~